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Geostrategic Impact of Shale Gas Development:
Polish Perspective
Rome, April 14, 2011
Katarzyna Kacperczyk, Ministry of Foreign Affairs, Poland
Ministry of Foreign Affairs
Republic of Poland
Shale gas – evolution…1821 - First U.S. commercial natural gas well in Fredonia, New York,
produces gas from shale
Late 1940s – Hydraulic fracturing first used to stimulate oil and gas wells. The first
hydraulic fracturing treatment (not shown here ) was pumped in 1947 on a gas well
operated by Pan American Petroleum Corporation in Grant County, Kansas.
Early 1970s – Development of downhole motors, a key component of directional
drilling technology, accelerates. Directional drilling capabilities continue to
advance for the next three decades.
1980s to early 1990s – Mitchell Energy combines larger fracture designs, rigorous
reservoir characterization, horizontal drilling, and lower cost approaches to
hydraulic fracturing to make the Barnett Shale economic.
2003 to 2004 – Gas production from the Barnett Shale play overtakes the level of
shallow shale gas production from historic shale plays like the Appalachian
Ohio Shale and Michigan Basin Antrim plays. About 2 billion cubic feet (Bcf)
of gas per day are produced from U.S. shales
2010 – Shale gas production amounted to more than 8 Bcf per day - 12% of the natural gas consumed
in the United States.
… or revolution?
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2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 20300.0
56.7
113.4
170.1
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283.5
340.2
396.9
453.6
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567.0
623.7
680.4
737.1
793.8
Unconventional gas production
growth
Convetional gas production growthCurrent production level
Source: ConocoPhillips (U.S. DOE, EIA Annual Energy Outlook, 2010)
tcf b
cm
According to the estimates, by 2030 U.S. production from
unconventional gas would reach 50% of total gas production
US gas market
Globalization of shale gas activities
United States, Canada, China, India, Poland, United Kingdom, Germany, France, Austria, Sweden, Holland, Denmark, Hungary,
Romania, Bulgaria, Ireland, Ukraine, Turkey, Tunisia, Morocco, Algeria, Mexico, Argentina, Indonesia, South Africa ...
Exploration (drilling tests)
Production
Licensing phase
Preliminary activities
Globalization of shale gas activities
Globalization of Shale Gas Technologies
Shale Gas Technologies: Worldwide Technologies?
horizontal drilling expertise: the easiest to make available.
fracturing: limited availability
(high capital costs of fracturing equipment and materials)
Determinants of shale gas technology’s globalization:
Asset purchase: (Shell/East Resources: Marcellus ; BG Group/Southwestern Energy:
Haynesville)
Joint-ventures (Statoil/Talisman: Eagle Ford; BG Group/Exco: Marcellus, Haynesville;
BP/Lewis Energy: Eagle Ford; Total/Chesapeake : Barnett; ENI/Quicksilver: Barnett;
Statoil/Chesapeake:Marcellus; BP/Chesapeake :Fayetteville)
Shale gas swaps: (PGNiG, Orlen);
Acquisitions (Exxon/XTO)
Expansion of US-based operators abroad;
Domestic R&D
Globalization of shale gas resources
Source: EIA, World Annual Outlook, 2011
Europe (in bcm):France 5 097
Germany 226
Nederland 481
Norway 2 350
UK 566
Denmark 651
Sweden 1 160
Poland 5 295
Turkey 424
Ukraine 1 189
Lithuania 113
Others 538
North America (in bcm):
USA 2 441
Canada 1 784
Mexico 1 444
South America (in bcm)
Venezuela 311
Columbia 538
Argentina 2 191
Brazil 6 399
Chile 1 812
Uruguay 594
Paraguay 1 755
Bolivia 1 359
Africa (in bcm)
South Africa 13 733
Libya 8 211
Tunisia 509
Algeria 6 541
Morocco 311
Asia (in bcm)
China
Indie 1 783
Indonesia 1 444
Europe’s Potential Shale Gas
ResourcesAssessment for:
Eastern Europe (excluded Poland):
65 Tcf (1,84 Tcm) of technically recoverable resource
Western Europe
372 Tcf (10,5 Tcm) of risked technically recoverable
Poland:
187 Tcf (5,29 Tcm) of risked technically recoverable
resource
Dynamics of shale gas development of
Shale Gas Development
2007 2010
Source: Ministry of Environment
Shale gas in Poland
From 2007 to March 2011 the Minister of the
Environment granted 80 concessions for
prospection and exploration of shale gas fields
5 exploration wells completed by March 2011
15 exploration wells planned in 2011
First reserves estimation and first potential
production in 2-3 years
Source: Ministry of Environment
Strategic implications: Impact on LNG countries and markets
Suppressed need to import LNG – emergence of potential new LNG exporting
countries
Lower demand for LNG (short-term)
LNG „wins” over long-term
Downward price pressure on natural gas
Gas „oversupply”
Larger volumes of LNG sold on spot-market
Prices competition from shale gas
Reducing seasonal volatility of gas prices
Altering global energy mix (shale gas vs. renewables, nuclear energy, CCS)
Growing role of gas compared to other fuels (coal switching to gas, replacing oil in transport)
Redefining geostrategic position of countries and regions
Impact on LNG markets
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Źródło: ConocoPhillips (U.S. Department of Energy, EIA Annual Energy Outlook)
2010
BCFD
2007
US LNG import
The dynamic development of shale gas production made the U.S. Department of Energy decrease
estimates significantly regarding imports of LNG to the U.S.
Strategic implications: Impact on LNG countries and markets
Suppressed need to import LNG – emergence of potential new LNG exporting countries
Lower demand for LNG (short-term)
LNG „wins” over long-term
Downward price pressure on natural gas
Gas „oversupply”
Larger volumes of LNG sold on spot-market
Prices competition from shale gas
Reducing seasonal volatility of gas prices
Altering global energy mix (shale gas vs. renewables, nuclear energy, CCS)
Growing role of gas compared to other fuels (coal switching to gas, replacing oil in transport)
Redefining geostrategic position of countries and regions
Implications for natural gas prices
Source: EIA, Annual Energy Outlook 2011
Strategic implications: Impact on LNG countries and markets
Suppressed need to import LNG – emergence of potential new LNG exporting countries
Lower demand for LNG (short-term)
LNG „wins” over long-term
Downward price pressure on natural gas
Gas „oversupply”
Larger volumes of LNG sold on spot-market
Prices competition from shale gas
Reducing seasonal volatility of gas prices
Altering global energy mix (shale gas vs. renewables, nuclear energy, CCS)
Growing role of gas compared to other fuels (coal switching to gas, replacing oil in
transport)
Redefining geostrategic position of countries and regions
European implications
Short term:
Increase in supplies of LNG - decrease of spot prices
Pressure on contract prices
Medium and long term strategic questions:
Reducing dependence on natural gas supplies from out of Europe
Increased pressure on long -term contracts and pricing formula
Re-evaluation of energy security and European energy and climate policy
(Energy Roadmap 2050)
Shale gas after Fukushima I and Libya
Strategic question: gas imports dependency
United Kingdom90 Bcm
16%
Norway90 Bcm
16%
Russia150 Bcm
27%
Caspian andMiddle East
5 Bcm1%
North Africa43 Bcm
8%
LNG60 Bcm
11%
Netherlands70 Bcm
13%
Wielka Brytania
72 mld m3
14%
Norwegia
90 mld m3
17%
Rosja
148 mld m3
28%
LNG
53 mld m3
10%
Region Kaspijski
i Środkowy Wschód
7 mld m3
1%Północna Afryka (gazociągi)
42 mld m3
8%
Holandia
64 mld m3
12%
Inne kraje UE
48 mld m3
9%
United Kingdom
72 Bcm
14%
Norway
90 Bcm
17% Russia
148 Bcm
28%
The
Nederlands
64 Bcm
12%
Caspian region
And Central East
7 Bcm
1%
North Africa (pipelines)
42 Bcm
8%
LNG
53 BCM
10%
Other EU
48 Bcm
9%
Potential shale gas resources in Europe: 15,7 TCM
Source: EU Commission
Strategic question: Pipeline projects
Reducing importance of existing and planned gas pipeline projects
Strategic question: long term contracts
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2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035
Gazprom: European long-term contracts.
Strategic question: EU climate policies
Lower SOx, NOx, and Mercury Emissions
GHG Emission Mitigation
Lower Carbon fuel
Allows the Use of Renewable Energy
EU Energy Roadmap 2050
Support transition to low-carbon
energy system in 2050
Focus on energy security,
competitiveness as well as
decarbonisation, throughout
transition
Identify European-wide perspective
Renewable
Energy Sources
(RES)
Nuclear Energy
Ho
w t
o a
ch
ieve
th
ese
go
als
Shale gas
Carbon Capture
and Storage (CCS)
EU Energy Roadmap 2050
Support transition to low-carbon
energy system in 2050
Focus on energy security,
competitiveness as well as
decarbonisation, throughout
transition
Identify European-wide perspective
Renewable
Energy Sources
(RES)
Nuclear Energy
Ho
w t
o a
ch
ieve
th
ese
go
als
Shale gas
Carbon Capture
and Storage (CCS)
Financing in the time of fiscal consolidation
Nuclear energy after Fukushima ???
Cost effectiveness, early stage of technology
development
Shale gas – a transition fuel to low-emission economy?
Poland’s chances… Strengthening Poland’s energy and climate security
Strengthening bilateral relations (political and economic) with countries involved in the
shale gas development
Deepening relations with neighboring countries, potential Polish gas customers
(especially V4 countries); Development of interconnectors;
Facilitating completion of internal energy market;
Redefining energy relationship with countries – major gas suppliers to the Polish
market, including transit countries (mainly Russia, Ukraine and Belarus)
Development of scientific and technical cooperation related to exploration and
production of hydrocarbons and other related areas (e.g. geology)
Strengthening economic position of Poland in region (additional revenues to the
budget, competitiveness of industry, service sector development, etc.)
… and challenges
Lack of social acceptance for development of shale gas
sector in EU countries
Environmental challenges:
„Natura 2000”
Lack of service companies and skilled personnel
Competition from other energy sectors
Competition from companies supplying gas to Europe
and stakeholders in major infrastructure projects
Existing forms of shale gas cooperation
Global Shale Gas Initiative (ca. 20 countries)
Strengthening regulations and standards
Exchange of best practices
Training support
GASH: assessment of shale gas resources in Europe
European interdisciplinary shale gas research (sponsored by Statoil, ExxonMobil, Gas de France
SUEZ, Wintershall, Vermillion, Marathon Oil, Total, Repsol and Schlumberger);
started in 2009; first phase: 3 years
development of a GIS-based European black shale database
Cooperation within the European Union
Conclusions on Energy, European Council, 4 February 2011: ”In order to further enhance its security of
supply, Europe's potential for sustainable extraction and use of conventional and unconventional (shale gas and oil
shale) fossil fuel resources should be assessed”.
Bilateral cooperation
To reach full potential of shale gas, cooperation of stakeholders is necessary!
